Where do I change the Max. file size (50 KB) in the Ajax filemanager.

Sorry, I actually meant to increase the low default value set by the file manager authors in the Zenpage 1.0.1 release. You can set that value in the file
zp-core/plugins/tiny_mce/plugins/ajaxfilemanger/inc/config.base.php in line 70.

Thanks, I tried to search for the parameter, but I didn't find it, due to my search params grep -r '50 KB' *

Would it be an idea to place this parameter within the 'plugin option' in the admin interface?

M:-)

Well, actually yes, but the ajax file manager is a pure standalone third party script I just took to save me from writing my own.
Actually I don't really want to change too much on it so that I don't have to bother with re-adding that with every update (we also recommend not to do that for the Zenphoto core..:-)).